Connect Access Card For Fundamental Accounting Principles
Connect Access Card For Fundamental Accounting Principles
24th Edition
ISBN: 9781260158526
Author: John J Wild
Publisher: McGraw-Hill Education
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Chapter 5, Problem 25E
To determine

Concept Introduction:

Journal entries:

The business runs with the transactions it makes. Every transaction results in some outcome like the creation of asset, liability, income, loss, gain or expense. The transactions are recorded on the basis of the resulted outcome. The debits and the credits are made on the basis of the rules of the accounting.

To prepare:

Journal entries to record the following transactions of Recycled Fashion retail store.

Expert Solution & Answer
Check Mark

Answer to Problem 25E

    DateAccounts Titles and DescriptionsDebitCredit
    Mar-03Merchandise Inventory
    1150
    Accounts Payable − Green World
    1150
    (To record purchase of inventory)
    Mar-04Merchandise Inventory
    75
    Cash
    75
    (To record payment of shipping charges)
    Mar-05Accounts Payable - Green World
    150
    Merchandise Inventory
    150
    (To record return of goods from Green World)
    Mar-18Accounts Payable - Green World
    1000
    Merchandise Inventory
    20
    Cash
    980
    (To record payment of accounts payable net of discounts and merchandise return)
    Mar-19Merchandise Inventory
    425
    Accounts Payable − PeopleFirst Corp.
    425
    (To record purchase of inventory)
    Mar-21Accounts Payable− PeopleFirst Corp.
    25
    Merchandise Inventory
    25
    (To record receipt of purchase allowance)
    Mar-29Accounts Payable− PeopleFirst Corp.
    400
    Merchandise Inventory
    4
    Cash
    396
    (To record payment of accounts payable net of discounts and merchandise return)

The above journal entries can be explained as under −

Mar 03 − The journal entry explains the purchase of merchandise inventory from Green World on accounts. Thus, merchandise inventory has been debited with $ 1150 and accounts payable are credited with $ 1150.

Mar 04 − The journal entry is related to the payment of shipping charges of merchandise inventory. Thus, merchandise inventory has been debited with $ 75 and cash is credited with $ 75.

Mar 05 − The journal entry is related to the return of merchandise inventory. Thus, merchandise inventory has been credited with $ 150 and accounts payable are debited with $ 150.

Mar 18 − The payment of accounts payable net of return and discount has been made. The net payment is calculated as under −

  Net Payment = Accounts Payable  Green World  Merchandise Returns  DiscountNet Payment = $ 1,150  $ 150  (($ 1150  $ 150) X 2 %)Net Payment = $ 1,000  $ 20Net Payment = $ 980

Thus, cash is credited with $ 980. The merchandise inventory is debited with $ 80 (discounts) and accounts payable has been debited with $ 1,000.

Mar 19 − The journal entry explains the purchase of merchandise inventory from PeopleFirst Corp. on accounts. Thus, merchandise inventory has been debited with $ 425 and accounts payable are credited with $ 425.

Mar 21 − The journal entry is related to the allowance received on purchases. Thus, merchandise inventory has been credited and accounts payable for PeopleFirst Corp. has been debited.

Mar 29 − The payment of accounts payable net of return and discount has been made. The net payment is calculated as under −

  Net Payment = Accounts Payable   Merchandise Returns  Purchase allowancesNet Payment = $ 425  $ 25  (($ 425  $ 25) X 1 %)Net Payment = $ 400  $ 4Net Payment = $ 396

Thus, cash is credited with $396. The merchandise inventory is debited with $ 4 (discounts) and accounts payable has been debited with $ 400.

Explanation of Solution

The above journal entries can be explained as under −

Mar 03 − The journal entry explains the purchase of merchandise inventory from Green World on accounts. Thus, merchandise inventory has been debited with $ 1150 and accounts payable are credited with $ 1150.

Mar 04 − The journal entry is related to the payment of shipping charges of merchandise inventory. Thus, merchandise inventory has been debited with $ 75 and cash is credited with $ 75.

Mar 05 − The journal entry is related to the return of merchandise inventory. Thus, merchandise inventory has been credited with $ 150 and accounts payable are debited with $ 150.

Mar 18 − The payment of accounts payable net of return and discount has been made. The net payment is calculated as under −

  Net Payment = Accounts Payable  Green World  Merchandise Returns  DiscountNet Payment = $ 1,150  $ 150  (($ 1150  $ 150) X 2 %)Net Payment = $ 1,000  $ 20Net Payment = $ 980

Thus, cash is credited with $ 980. The merchandise inventory is debited with $ 80 (discounts) and accounts payable has been debited with $ 1,000.

Mar 19 − The journal entry explains the purchase of merchandise inventory from PeopleFirst Corp. on accounts. Thus, merchandise inventory has been debited with $ 425 and accounts payable are credited with $ 425.

Mar 21 − The journal entry is related to the allowance received on purchases. Thus, merchandise inventory has been credited and accounts payable for PeopleFirst Corp. has been debited.

Mar 29 − The payment of accounts payable net of return and discount has been made. The net payment is calculated as under −

  Net Payment = Accounts Payable   Merchandise Returns  Purchase allowancesNet Payment = $ 425  $ 25  (($ 425  $ 25) X 1 %)Net Payment = $ 400  $ 4Net Payment = $ 396

Thus, cash is credited with $396. The merchandise inventory is debited with $ 4 (discounts) and accounts payable has been debited with $ 400.

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Chapter 5 Solutions

Connect Access Card For Fundamental Accounting Principles

Ch. 5 - Prob. 11DQCh. 5 - Prob. 12DQCh. 5 - Prob. 13DQCh. 5 - Refer to the income statement of Samsung in...Ch. 5 - Prob. 15DQCh. 5 - Applying merchandising terms C1 P1 Enter the...Ch. 5 - Identifying inventory costs C2 Costs of $5.000...Ch. 5 - Merchandise accounts and computations C2 Use the...Ch. 5 - Computing net invoice amounts P1 Compute the...Ch. 5 - Recording purchases, returns, and discounts taken...Ch. 5 - Recording purchases and discounts taken P1 Prepare...Ch. 5 - Recording purchases and discounts missed Pl...Ch. 5 - Recording sales, returns, and discounts taken P2...Ch. 5 - Accounting for shrinkage—perpetual system P3...Ch. 5 - Closing entries P3 Refer to QS 5-9 and prepare...Ch. 5 - Multiple-step income statement P4 For each item...Ch. 5 - Preparing a multiple-step income statement P4...Ch. 5 - Exercise 5-13 Physical count error and profits A2...Ch. 5 - Prob. 14QSCh. 5 - Prob. 15QSCh. 5 - Prob. 16QSCh. 5 - Recording purchases, returns, and...Ch. 5 - Recording sales. returns, and discounts—periodic &...Ch. 5 - Prob. 19QSCh. 5 - Prob. 20QSCh. 5 - Prob. 21QSCh. 5 - Prob. 22QSCh. 5 - QS 5-23 Sales transactions P2 Prepare journal...Ch. 5 - Exercise 5-1 Computing revenues, expenses, and...Ch. 5 - Prob. 2ECh. 5 - Exercise 5-3 Recording purchases, purchases...Ch. 5 - Exercise 5-4 Recording sales, sales returns, and...Ch. 5 - Exercise 5.5 Recording purchases, purchases...Ch. 5 - Exercise 5-6 Recording sales, purchases, and cash...Ch. 5 - Exercise 5-7 Recording sales, purchases, shipping,...Ch. 5 - Exercise 5-8 Inventory and cost of sales...Ch. 5 - Exercise 5-9 Recording purchases, sales, returns,...Ch. 5 - Exercise 5-10 Preparing adjusting and closing...Ch. 5 - Prob. 11ECh. 5 - Exercise 5-12 Impacts of inventory error on key...Ch. 5 - Exercise 5-13 Physical count error and profits...Ch. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Prob. 18ECh. 5 - Prob. 19ECh. 5 - Prob. 20ECh. 5 - Prob. 21ECh. 5 - Prob. 22ECh. 5 - Prob. 23ECh. 5 - Prob. 24ECh. 5 - Prob. 25ECh. 5 - Problem 5-1A Preparing journal entries for...Ch. 5 - Problem 5-2A Preparing journal entries for...Ch. 5 - Problem 5-3A Computing merchandising amounts and...Ch. 5 - Problem 5-4A Preparing closing entries and...Ch. 5 - Prob. 5APSACh. 5 - Problem 5-1 B Preparing journal entries for...Ch. 5 - Problem 5-2B Preparing journal entries for...Ch. 5 - Problem 5-3B Computing merchandising amounts and...Ch. 5 - Problem 5-4B Preparing closing entries and...Ch. 5 - Problem 5-5B Preparing adjusting entries and...Ch. 5 - SP 5 Santana Rey created Business Solutions on...Ch. 5 - Prob. 1GLPCh. 5 - Prob. 2GLPCh. 5 - Prob. 3GLPCh. 5 - Prob. 1AACh. 5 - Key comparative figures for Apple and Google...Ch. 5 - Prob. 3AACh. 5 - Prob. 1BTNCh. 5 - Prob. 2BTNCh. 5 - Prob. 3BTNCh. 5 - Prob. 4BTNCh. 5 - Prob. 5BTNCh. 5 - Prob. 6BTN
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